RI ready to support coffee consortium plan

Adianto P. Simamora, The Jakarta Post, Jakarta

In a bid to help prop up the sluggish price of coffee, some key producing countries, namely Indonesia, Vietnam and India, are planning to set up a joint coffee consortium, the Association of Indonesian Coffee Exporters (AEKI) says.

"The three countries have, in principle, agreed to set up a joint coffee consortium and we will hold the first meeting in Vietnam, possibly by the end of this month, to discuss the mechanism," AEKI vice chairman Nuril Hakim told reporters after meeting with Minister of Trade and Industry Rini M. Soewandi on Monday.

Rini will lead the Indonesian delegation which will comprise top ministry officials and local coffee exporters.

Nuril said that under the planned consortium each country would buy coffee from their respective local markets and set up a stockpile so as to prop up the coffee price to 90 U.S. cents per kilogram, from the current 41 U.S. cents.

"We are ready to withhold some 100,000 tons of coffee, and we hope both Vietnam and India will be ready to withhold 300,000 tons and 50,000 tons respectively to meet the target of 90 U.S. cents per kilogram."

Nuril added that Rini had also pledged to seek help from local banks such as Bank Export Indonesia, Bank Rakyat Indonesia and Bank Central Asia, to finance this retention plan.

"We need some Rp 30 billion to buy and withhold 100,000 tons and Ibu Rini has pledged to seek help from the local banks," Nuril said.

According to Nuril, the planned consortium was adopted from the $225 million joint rubber consortium, which was established by Indonesia, Thailand and Malaysia, to raise rubber prices to a $1 per kilogram this year.

Under the consortium, Thailand, as the biggest rubber exporter, agreed to contribute $25 million. Indonesia, the second biggest rubber exporter, will contribute $18.75 million and Malaysia will give $12.5 million.

However, Rini admitted that Indonesia could only contribute some $1 million due to a lack of funding from the government.

Last year, the cash-strapped government also failed to finance a Rp 40 billion retention plan to retain 8,000 tons of coffee as proposed by The Association of Coffee Producing Countries, due to the lack of funding both from the government and exporters.

Coffee prices have long been under pressure amid an oversupply problem in the market due to abundant supplies from the world's largest coffee producers, particularly Brazil and Vietnam.

Brazil's annual coffee output totals 1.95 million tons, while Vietnam produces 900,000 tons. Both countries jointly control 38 percent of the world's total coffee production.

In Indonesia, some local coffee growers have complained that they have been suffering losses as the coffee price is far lower than the production costs.

The low price had also discouraged many local growers from taking proper care of their crops which resulted in a drop in the country's coffee output.

Indonesia produces about 500,000 tons of coffee a year. More than 85 percent of its total production is exported.

The provinces of Lampung, Bengkulu and South Sumatra account for 75 percent of Indonesia's coffee output.